Hennessee Group: Hedge Funds Gain 1.65% in April

May 16 2016 | 9:00pm ET

April data from hedge fund industry observer Hennessee Group showed strong outperformance by the investment class month, the latest benchmark to reflect an improved environment for alternative investment managers. 

The Hennessee Hedge Fund Index gained +1.65% in April, trimming its year-to-date decline to -0.72% and besting the S&P 500’s April return of +0.27%.

“Hedge fund performance in April was the best year-to-date performance relative to broad market averages with all but 4 of 21 Hennessee sub-indices registering positive performance.” commented Charles Gradante, co-founder of Hennessee Group LLC. “However, in April, the market began downgrading prospects for the market in May due to the 50th consecutive monthly decline in producer prices and no pricing power at the wholesale level."

The top three strategies for the month were Opportunistic, up +5.79%, Latin America, up 4.84%, and Distressed, up 3.63%.  The bottom three strategies for the month were Short Biased (-1.55%), Growth (-0.17%) and Asia-Pacific (-0.10%).

The VIX remained at lower levels for the majority of the month, Hennessey observed, ranging between 13 on the low end and 16.5 and on the high end. The absence of volatility during the month was a relief for investors after fear consumed the markets first six months of the year, wrote the company.

Equity long/short hedge funds were positive for the month, as the Hennessee Long/Short Equity Index gained +2.07%. The best performing sectors were energy (+8.65%), materials (+4.90%), and financials (+3.27%), while underperforming sectors were information technology (-5.47%), telecommunication services (-3.14%) and utilities (-2.45%). 

The Hennessee Arbitrage/Event Driven Index increased +1.52% for the month, pushing the measure into the green for the yeare to date. Meanwhile, the Hennessee Distressed Index was positive for the month by +3.63% and is now +1.45% YTD, the Hennessee Merger Arbitrage Index lost -0.02% for the month and remains down -2.43% for the year. The Hennessee Convertible Arbitrage Index was positive for the month, gaining +2.41% (+2.05% YTD).

“Macro and Global Macro managers continue to have one of their better years, up +4.0% and +1.02% YTD, respectively, reported Hennessee, on the strength of correct positioning in currencies, metals and oil.’

“Managers continue to report media and investor questioning of the validity of the hedge fund strategy,” continued Gradante. “One manager echoed the general sentiment by stating that the hedge fund industry went through a similar period from 1995 to 1999 when the ‘dot.com’ era created an equity market overwhelmed with momentum stocks with greater downside than upside.

"The NASDAQ took over a decade to recover, while hedge funds protected the downside and outperformed the equity market by 88% through 2009,” Gradante observed.

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